Jeff Bezos is expanding his empire. This morning, Amazon.com, Inc. (AMZN) announced a big $13.7 billion deal to acquire Whole Foods Market, Inc. (WFM). The news has generated fear among competitors in the grocery business that Amazon will do to them what Amazon has done to brick in mortar. Wal-Mart shares fell four percent on the news and many other grocery giants saw share declines of even more than that.
On a side note, Barry Rosenstein’s JANA Partners made a nice profit – the hedge fund recently purchased shares of Whole Foods Market, Inc. (WFM) which are up close to 30% on the buyout news.
So what is next will Amazon.com, Inc. (AMZN) takeover your grocery life also? Are there anti trust issues? Will even giants like Wal-Mart be impacted? Is this the beginning of the grocery apocalypse?
Marathon Partners Equity Management, the equity long/short hedge fund founded in 1997, added 8.03% in the second quarter of 2021. Q2 2021 hedge fund letters, conferences and more According to a copy of the hedge fund's second-quarter investor update, which ValueWalk has been able to review, the firm returned 3.24% net in April, 0.12% in Read More
Below is what analysts are saying about the deal.
Amazon.com, Inc. (AMZN)’s announcement that it would acquire Whole Foods Market, Inc. (WFM) ($42/sh, $13.7B) marks a significant step in its push into physical retail. Whole Foods gives Amazon a fleet of attractively located stores, very strong brand, and credibility within food retail. We also add that the overlap between Whole Foods’s affluent customer base and Amazon’s is likely very high.
Overall, we think this makes a significant turning point in the battle for retail, and akin to WMT’s acquisition of Jet.com.
BAML has stopped covering the stock, but they do not say they are acting as an advisor. BAML notes:
closing price and roughly 10.5x EV/trailing twelve month adj. EBITDA) in an all-cash deal. The deal is expected to close in the second half of 2017. We believe the stock is no longer trading on its fundamentals. Investors should no longer rely on our prior rating or price objective.
On an unrelated segment, in a new note Pacific Crest opines:
Analysis of the 60 largest cloud companies reaffirms our view that the shift to cloud is still early and just now entering mainstream adoption; public cloud spending appears poised to triple to $239B
by 2021. While Microsoft is poised to surpass AWS this year in aggregate cloud revenue, we still see a robust growth opportunity for AWS through 2021. Investor optimism is reflected in the AMZN valuation at 25x EV/FCF on 2018 estimates.
Goldman on AWS
We attended Amazon.com, Inc. (AMZN)’s AWS AI Day hosted at its NYC AWS Loft. The day included various workshops focused on a number of available services delivering computer vision, natural language processing, and text-to-speech solutions, among others, demonstrating the rapid pace of innovation and growing breadth of services offered.
Nomura opines on Amazon.com, Inc. (AMZN) in general.
We think that optimism for Alexa/AI, the large advertising opportunity, and video growth initiatives have provided investors increased confidence in Amazon.com, Inc. (AMZN)’s long-term addressable market opportunities, this as the company continues to flex its muscles in its core ecommerce businesses. In this note, we look at valuation from three perspectives and relate them back to Amazon’s expected growth trajectory. With this note, we raise our target price to $1,100 from $975.
What do you think of the deal and/or AWS? Comment below